11.03.2008

Inside WaMu's "boiler room"

Was There a Loan It Didn’t Like?

Excerpt:

MS. COOPER started at WaMu in 2003 and lasted three and a half years. At first, she was allowed to do her job, she says. In February 2007, though, the pressure became intense. WaMu executives told employees they were not making enough loans and had to get their numbers up, she says.

“They started giving loan officers free trips if they closed so many loans, fly them to Hawaii for a month,” Ms. Cooper recalls. “One of my account reps went to Jamaica for a month because he closed $3.5 million in loans that month.”

Although Ms. Cooper couldn’t see it, the wheels were already coming off the subprime bus.

“If a loan came from a top loan officer, they didn’t care what the situation was, you had to make that loan work,” she says. “You were like a bad person if you declined a loan.”

One loan file was filled with so many discrepancies that she felt certain it involved mortgage fraud. She turned the loan down, she says, only to be scolded by her supervisor.

“She told me, ‘This broker has closed over $1 million with us and there is no reason you cannot make this loan work,’ ” Ms. Cooper says. “I explained to her the loan was not good at all, but she said I had to sign it.”

The argument did not end there, however. Ms. Cooper says her immediate boss complained to the team manager about the loan rejection and asked that Ms. Cooper be “written up,” with a formal letter of complaint placed in her personnel file.

Ms. Cooper said the team manager told her to “restructure” the loan to make it work. “I said, how can you restructure fraud? This is a fraudulent loan,” she recalls.

Ms. Cooper says that her bosses placed her on probation for 30 days for refusing to approve the loan and that her team manager signed off on the loan.

Four months later, the loan was in default, she says. The borrower had not made a single payment. “They tried to hang it on me,” Ms. Cooper said, “but I said, ‘No, I put in the system that I am not approving this loan.’ ”

Brokers often tried to bribe Ms. Cooper to approve loans, she says. One offered to pay $900 to send her son to football summer boot camp if she would approve a loan that had been declined by a host of other lenders. “I told him no and not to disrespect me like that again,” Ms. Cooper says.

Hidden fees meant brokers could easily make between $20,000 and $40,000 on a $500,000 loan, Ms. Cooper says.

...

Ms. Cooper says that loans she turned down were often approved by her superiors. One in particular came back to haunt WaMu.

Vetting a loan one day, Ms. Cooper says she became suspicious when a photograph of the house being bought showed one street address while documents deeper in the file showed a different address. She contacted the appraiser, and recalls that he said that he must have erred and that he would send her the correct documents.

“So then he sent me an appraisal with a picture of the same house but this time with the right number on it,” Ms. Cooper recalls. “I looked the address up in our system and could not find it. I called the appraiser and said, ‘Please investigate.’ ”

The appraiser came back, reporting that a visit to the California property had found everything in order and in agreement with the original appraisal. “I was so for sure that it was fraud I wanted to get on an airplane,” Ms. Cooper says.

The $800,000 loan was approved, but not by Ms. Cooper. Six months later, it defaulted, she says. “When they went to foreclose on the house, they found it was an empty lot,” she recalls. “I remember clear as day this manager comes over to me and asks, ‘Do you remember this loan?’ I knew just what she was talking about.”


Comment: Decisions in rooms like these greased the Mortgage crisis

3 comments:

  1. I guess I was wrong when I discussed this with you before. I'd said that whoever buys WaMu needed to fire all the director level employees and up; now I guess they all need to be in jail.

    And you and I get stuck with the bill. Maybe we can confiscate their houses to pay for what they've done.....

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  2. I've lived overseas since 2005 - just the other day someone (native to this country) asked me if corruption was as bad in the US as it is here. This article further confirms my thoughts. I said yes it's just as bad - just different, and involves far more amounts of money than here. Instead of handing $5 to the police on the street to overlook the fact that your license is expired or your registration tags aren't current, it's millions that exchanges hands in more "sterile" ways.

    Unfortunately I think the people of each country feel equally powerless to actually do anything about it.

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  3. I copied this from another statment I made in another forum.

    "Does anyone else wonder if the dollar will collapse, we'll have a new Bretton-Woods type agreement, and some type of new international monetary unit will replace the dollar?"

    I think there's a lot of nefarious things that happen behind the scenes. If it's not technically illegal, I think a lot of things aren't ethical. We have turned into a socialistic country with the recent bailout that both parties voted for. I was not for that, but it seemed to get ramrodded through and haven't we found out that a lot of the recipients of the bailout funds have spent it on somewhat dubious things like bonuses and trips? What else are we going to nationalize - GM?

    I hope things don't get too bad, but some think that it actually will, thanks in part to nefarious, behind-scenes-deals, and this will cause the dollar to basically collapse. Thus the need for a new international monetary unit other than soley the dollar.

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